1. Leanne Harris | Jovan Kouza | Lauren Mahlberg | Melissa Tomlin | Kyle Vander Schaaf | Sean
Ward
2. Presentation Overview
- Company Background
- Product Profile
- Industry Analysis
- Market Segment Analysis
- Competitor Analysis
- Customer Analysis
- Product Line
- Business Strategy
- Distribution Channels
- Pricing Strategy
- Promotional Strategy
- Selling Strategy
- Marketing Plan
Assessment
- Recommendations
3. Company Background
- Founded by Mike Hess
- Began as a home brewer
- “The Hess Brewing Odyssey”
- July 2010, opened to the public
- 33rd brewery in San Diego
- 3 to 30 barrel system
Two locations:
Miramar & North Park
Family friendly!
Kids and dogs welcome
4. “Our mission is to brew great beer.
No exceptions. No excuses.”
5.
6. Industry
According to the Brewer’s Association...
- 2014: 3,464 breweries in operation
- 19% growth | 46 out + 615 new
- 22.2 million barrels | 18% volume growth
Growth of San Diego Craft Breweries
8. Competitor Analysis
- Corporate: Anheuser-Busch & MillerCoors
- San Diego - Regional: Stone & Ballast Point
- San Diego - Micro: Saint Archer & Fall
Differentiation is key!
9. Macro-Environment
Analysis
- License and regulation for opening brewery
- Important role of water - drought conscious
- Recent lifts on beer laws in Midwest/East
- Disposable income - DINKS (dual-income, no kids)
- Females make up 15% of craft beer drinkers now
Allocation of Water Usage
10. Customer Analysis
B2B
- Restaurants, Bars,
Grocery and Liquor Stores
- Rotating taps
- Must develop long-term
relationships with partners
- High level of involvement
- Position: on the go beer
B2C
14. Business Strategy
B2B
- Use push strategy
- Only flagship beer
- Narrow selection
B2C
- Use pull strategy
- Tasting room offers
specialty beers and
flights
- Deep selection
Social Media + WOM
15. Distribution Channels
- Industry 3 Tier System
- Producers
- Distributors
- Retailers
- Hess Geographic Distribution
- San Diego
- Los Angeles
- Fresno
- Phoenix
- Proud to be the only canned craft beer in the
Yosemite Valley.
16. Distribution Channels
Hess Brewing 4 Tier System
- Consistent customers allowing permanent shelf
space.
- Heavily rotating handles that go through kegs at a
rapid pace.
- Selective bar only gaining tap space every so often.
- Non-buyer that has potential to be a customer.
18. Pricing Strategy
- Value-Based
- Product is differentiated through distinct flavor, and
packaging that appeals to a broad spectrum of
consumers
- Price consideration factors
- Although there is a collaborative market price with
San Diego breweries, no brewery is immune to
fluctuating prices of raw ingredients
- No fluctuation with competition - must
emphasize value and culture
19. Retailers Price Per Beer
- FRC pays $1.61/
beer
- Hess Brewing
attempts to
maintain a 30%
profit margin
Inventory Document TFK
BEER
Price per
unit
Units
purchased
Total Cost
($)
Angry Orchard $1.14 208.00 $237.12
Ballast Point Pale
Ale
$1.20 83.00 $ 99.60
Ballast Point Calico $1.20 33.00 $39.60
Grazias Vienna
Cream Ale
$1.61 42.00 $67.62
20. Price Break Down
Raw Ingredients = .11
Packaging = .15
Labor = .01
Shipping = .07
Taxes = .02
Loss = .02
Distributors Margin = .24
22. Promotional Strategy
- Social media|Consumer Content
- Events + Press Coverage
- Hess Brewing is the most philanthropic micro brewery in
San Diego
- Tasting Room in North Park
- Heavy foot traffic
- Acquiring Petco Park account
- Pop-Top Can
23. Global Outreach
- Hess created blog for nanobreweries
- Giving back to the community
- Q&A coming from experience instead of trial and
error
- 2014 Gold World Beer Cup
- 91 different categories
- 47 entries in Rye category
- Habitus brought home the Gold
24. Selling Strategy
- Sales Force Composite Approach
- Brand Ambassadors
- Increase brand awareness
Greg Hess - Sales and Distribution Manager
25. Assessment &
Recommendations
DISTRIBUTION (PLACEMENT)
- Expand across U.S. – esp. in recent news of brewery
bans being lifted
- Penetrate current regions – SF, Yosemite, event/sport
venues in LA/SF
PRODUCTION (PRODUCT)
- Open larger production facility in business park or water-
friendly states to satisfy demand
- Continue with cans – stimulate demand with pop-top can
- Innovative beers
26. Assessment &
Recommendations
PROMOTION
- Continue positioning as “kickback” beer as opposed to
“rager”
- Continue social media and grassroots marketing
- Collaborate with well-known breweries
PRICING
- Increase economies of scale with larger production facility
in low-cost area
- Keeping same profit margins with lower prices
Lauren
Craft breweries produced 22.2 million barrels in 2014, making it an 18% volume growth from the previous year
In 2011, there were only 37 breweries and brewpubs located in San Diego, as compared to 97 at the end of 2014
Lauren
A nano brewery produces 3 barrels or less and does not have any desire to distribute their beer to retailers. Mike Hess states that “the homebrewers aren’t doing something this big and the big guys aren’t doing something this small” [1].
The next level of beer production is a microbrewery. The most encompassing definition of a microbrewery explains it as a brewery that is independently owned, has limited production, distributes locally, and focuses on the taste, quality, and innovation of the beers. Next would be a regional craft brewery. This is classified as brewing up to 6,000,000 barrels per year as well as distributing across the nation. The next craft beer segment is the contract brewing company. In this segment, a brewery will hire a contract brewing company to produce supplemental beer or to handle the marketing, sales, and distribution of the beer the original brewery produces. The final segment is the brewpub: a full restaurant with their own beer brewed on the premises and sold for consumption in the restaurant.
Hess Brewing falls under the microbrewery category for its smaller size - by volume - and creativity in beer production.
Lauren
Saint Archer: Since the start in April 2013, Saint Archer has increased their production by 40%. Partnered with Stone’s distribution company - just started serving NorCal.
Coincidentally, the same head brewer who opened Fall came from Saint Archer, and before that was a known brewer from Left Coast
Fall Brewing: In North Park. Aggressive efforts to get beer in bars and restaurants, but has not packaged yet.
Differentiation: Customers want new and exciting beers and flavors. Breaking away from drawn out IPA.
Jovan
Jovan
B2C: The level of product purchase involvement is low due to the small unit price, variety of choices in the market, and low switching costs between brands. In addition to these factors, there are many influencers who can sway the consumer. Since going to a brewery is a highly regarded social event, taking advice and recommendations from peers is frequent.
B2B: Many options for consumers, and bars/restaurants want to provide variety. The level of involvement is much higher for business to business consumers because their financial goals are on the line. The influencers in the buying process focus on what the consumers want, and which types of beers are trending.
Melissa
Unlike most breweries that offer the typical India Pale Ale, Stout, and Witbier, Hess’ flagship beers are less common such as the Kolsch, Vienna Cream Ale, and Rye India Pale Ale. Whereas many competitors see these styles as specialty, Hess views them as their everyday beers, with fun flavors as their limited selection.
Melissa
The main marketing strategy Hess relies on is word of mouth to target local, craft beer drinkers looking for new flavors. They also utilize social media to let their followers know about special events, discounts, and news about the brewery.
The importance of differentiation is prominent in the marketing strategies of all breweries at this stage.
With consumers, Hess mostly relies on a pull marketing strategy
Different product mix for B2B and B2B For the consumers in the tasting room, or local bars and restaurants, the selection is deeper. They have the opportunity to try many beers at once in a tasting flight, as well as any of the specialty beers they are serving at the time. For businesses, Hess only packages their flagship beers, and thus has a narrower selection of products.
Kyle
They have one distributor in San Diego, three distributors in Phoenix, five distributors in Los Angeles, as well as three in Fresno. Hess is proud to be the only canned craft beer in the Yosemite Valley.
Going through a distributor, the brewery loses 20-30% on margins. The distributor, however, does help the brewery generate sales and allow for growth.
Four tier system for rating the company’s distribution accounts. Tier one is made up of consistent customers and permanent shelf space locations such as liquor and grocery stores. Tier two would be heavily rotating handles in bars that go through kegs at a rapid pace. Tier three would be a bar that is somewhat selective on their beers and likes to give their customers a wide variety so they rotate the beer on tap frequently; this would make them more of a sporadic account. Tier four is a non-buyer that has potential to become a customer. The goal is to create a relationship that could potentially move a tier four to a tier one.
The distribution channels are as wide as their production will allow without compromising supply or quality.
Kyle
Kyle
Sean
The consumer essentially decides what the beer costs through demand and purchases are generally made based on personal preference.
price takes into consideration factors such as: distributor/retailer/brewers margins, raw ingredients, packaging, labor, and taxes.
For craft beer, the price does not fluctuate with competition, forcing breweries to emphasize the value of their product and company culture.
Sean
Sean
Sean
Use of social media: Facebook, Twitter, Instagram, Google+
Sean
building accounts and getting others to do social media for them. Participating in events and adding the North Park tasting room helped increase word of mouth around the company.
“The success of Mike Hess Brewing has been the result of brewing distinctive, high quality beers that appeal to a broad range of tastes, coupled with intelligent social marketing and effective branding. Glowing press coverage from our beginning in local publications, SD Reader, West Coaster and others were followed by national stories in Beer West, Celebrator Magazine, the New York Times and the Wall Street Journal.” [13]
A big part of this is attributed to their upgraded facility and the added tasting room conveniently located in North Park where there is heavy foot traffic. Hess stated that having the production process clearly visible while people are sampling and purchasing the product has proven to stimulate the business.
They have been extremely successful with ‘tap takeovers’ where a bar will feature a brewery by solely offering that brewery’s product. Beer dinners, which are exclusive events where Hess pairs a beer for each course during a planned meal, have also been helpful with increasing brand awareness.
They have recently come up with a new pop-top can, bringing back the old pop-top feel. With the new can, the whole top pulls off rather than just a sipping circle. very unique and can draw a lot of attention to the Hess brand
Sean
Sean
sales force composite approach. The sales team must build and maintain relationships with the vendors to secure more standardized ordering. Hess Sales team is starting to understand the needs of the customer, market, and competition. Through sales force composition the team is building lasting relationships with the vendors where they are able to share product knowledge, and forecasts customers needs. Hess’ believes that through persistency they will be able to secure more permanent accounts. Hess has employed brand ambassadors to create market awareness and maintain relationships with vendors.
Hess Brewing currently has five brand ambassadors who make up the sales team. Each person is responsible for a different geographic location; three are spread out over the county of San Diego, one is responsible for Los Angeles and Orange County, and one is in charge of Arizona [13]. As a brand ambassador, the employees are representatives of Hess Brewing in all aspects including appearance, demeanor, values, and ethics [21]. This team is led by Greg Hess who works as the Sales and Distribution Manager.
Their main goal is to increase brand awareness and spread the word about Hess Brewing’s exceptional beers.
